112 



FARMERS' REGISTER— ESSAY OF USURY LAWS. 



It is just at this .point that universal confidence has 

 conipletely overstrained" the whole credit -system. 

 Credit every wliere is substituted for cash among 

 individuals, and the banks are makinsi: the largest 

 possible issues with the smallest possible reserve 

 of spcele in the vaults. Che circulation to*- be- 

 comes much more rapid, and a consequent pro- 

 digious economy in the use of money is the result. 

 When confidence for example, is univereal, debits 

 and credits are compared together, and the balance 

 alone paid in cash-. Thus A'may oiveJB — B owe 

 C — C owe D, and so ^n through the alphabet — 

 and Z perhaps may stand indebted to A. Npw 

 when confidence is perlect, and all are apparently 

 moving Ibnvard in the full tide of prosperity, their 

 accounls will be compared together, B will trans- 

 fer his.-claim on A, to his creditor C; C to D, D to 

 E,and soon through the alphabet,- until it reaches 

 Z, who we suppoaS, stands indebted, to A in .the 

 same amount. All these twenty-five transactions 

 then would be selded at once, without.the passage 

 oi" a sbigJe dollar, merely J^y balanculg debits and 

 credits: and at all times Avhen confidence was 'gen- 

 eral, cash would be required only for the balaiice 

 due, alter comparing the debits and credits to- 

 getlier. This is found -fo be actually the practice 

 iii London. '-In order to economise the use of 

 money'' says Mr. JNIcCuHoch '-the principal bank- 

 ers.-of the mefropolis arc in the habit of sending a 

 clerk each day to the clearing house in Lombard 

 street, who carries with him the various bills in 

 the possession of those bankers, which are drawn 

 upon his constituents; the balance on the one side 

 or other, is then paid in cash, or Bank of England 

 paper. By this admirable contrivance,- the bank- 

 ■ ers of London are enabled to settle, transactioiis to 

 the amount of several miliions. a' day, by the in- 

 tervention of not more, on an average", than from 

 £200,000 to £300,000 of cash or bank notes." 

 The exchanges, says j\tr. Gallatin inthe-report of 

 the Union Committee, etfected daily ift the city of 

 New York alone, amount in all to )»;5,000,000 us- 

 ing to 1500,000,000 per year: payments are made 

 and exchanges effected here, no doubt, upon prin- 

 ciples similar .to those upon which the London 

 bfinkers economise money. Thus do we see tliat 

 in season.? of apparent prosperity, Avhen the-spirit 

 of .speculation is afloat, confidence actually stands 

 instead of money. On such occasions we may 

 well say with Mr. "Wade, ^'by the the use of Bills 

 of exchange, bills of lading, ch'ecks, scrip, notes, 

 clearing houses, and a variety of other contri- 

 vances, aided by a vast fabric of credit taken and 

 given in open account, money .(in its common ac- 

 ceptation)hardl}''-ever enters into mercantile affairs; 



banking system; thus taking, the effect in many 

 cases for the cause. The fact is, these money pres- 

 sures occur frequently in countries which have a purely 

 mctalhc currency. Thus in Hamburg:, there are no 

 banks: yet in 1799 there was. in Hamburg, a monty 

 pressure, accompanied with a. fearful list of banknipt- 

 cies^ and a rate of interest ranging up to. 15 per cent. 

 .There are no bank notes m circulation in X,ancashire 

 in England. Bills of exchange form more thaii nine- 

 tenths of the currency "there,, and yet no district in 

 England has sulfered more by money pressures. 

 There are so many ways in which credit may be ex- 

 tended without the agency of banks, that I am some- 

 times disposed to doubt whether these money pressures 

 would not take place to ahnost an equal extent with- 

 out them. : " 



it is the substance really meant and shadowed forth; 

 but it rarely, as one may -say bodily, passes from 

 mei-cllant to merchant; "the business fttUhe mer- 

 cantile, classes being reduced, by a. w^derful sys- 

 tem of balancing payments, to litde more than a 

 game at chess, or the' worldng in their counting 

 houses of -an algejaraic equation consisting of the 

 debit and credit side of each account, and commu- 

 nicating the result to their agents, customers and 

 correspondents, iif every.part of the globe.'? Now 

 suppdsuig the wliole circulating.rtiedium to rcmairi 

 the same, it is evident that a sudden shock given 

 to public confidence, Avill retard the velocity ol cir- 

 culation, and produce a money p^ressure at once. 

 This we have lately seen fully exemplified in our 

 own country since the, rash removal of the deposites 

 0.ur prcs'int pressure is not occasioned; by a dimi- 

 "nution of bank paper as some hav« imagined, Ibr 

 veryhtde, ifiany diminution has .taken place; 

 it is owing -to the dimmished velocity of the cir- 

 culation. So soon as you' destroy confidence, cre- 

 dits, no longer serves for cash; A stands in-- 

 debted to B, who wiU not take debts diie to. A in 

 paygngnt as before: dealing becomes isolated* — 

 debits and credits are no longer compared, and 

 the balance struck. The daily transactions to the 

 amount of millions in London and New York, can- 

 not, under these circumstances, be settled|.by a lew 

 hundred thousand pounds, or dollars. More cash 

 is rerfui red. than before. Juat at this time the 

 merchant seeing the storni that is gathering around 

 him, mu.st keep more idle money about him to 

 meet his occasional demands — every debtor must 

 do the same. This produces a much greater ab- 

 straction irom the currency than is generally ima- 

 gined. Now what is the effect/of the usury laws 

 in such a' crisis as this? Most evidently, to in- 

 crease' the pressure. Men who have capital to 

 lend in this season of alarm and uncertainty, will 

 -not venture forth "with it, because legal interest 

 will not cover the risk They hoard, therefore, 

 rather than jeopard their capital, and thus it is, at 

 a time when tjiere is the greatest demand for cap- 

 ital, the usurj- laws cause it to disap])ear, and thus 

 add to the calamities of the times. ._ It is said, du- 

 ring the late commercial distress iii New York, 

 the deposites were very, great in the most secure 

 banks. In such times as these, oidy permit indi- 

 viduals to take a fan- rate of interest for the risk in- 

 curred, and all the capital of society Avill immedi- 

 ately be drawn into active rise. You may say in- 

 deed, that many wiU be rumed by the high rate of 

 interest at which they borrow capital. Grant it — 

 but would not that ruin equally and more certainly 

 follojv, by forced sales of their property? And re- 

 collect, that the loss incurred by a forced sale can 



* A^ a proof of the truth of the doctrine liere ad- 

 vanced, I would advert to the two great money pres- 

 sures ia England in 1793 and 1810 and 11. In both 

 case"S'government determined to issue exchequer bills, 

 and it seems that the mere determiflation of the govern- 

 ment was sufficient to restore confidence and remov'e 

 the pressure before the bills were issued. I have no 

 doubt but that the phui- of Governor Marcv, in New 

 York, to create .'b,;6,000,000 of stock, to b'e lent 'out 

 in the state will, if it ^ha^ not already dona it, re- 

 lieve the pressure in New York. I would not however 

 for a inomfent be supposed capable of applauding such 

 an immoral scheme: a scheme which proposes to make 

 the state responsible for the acts and misconduct of 

 banks and politicians. 



